CALGARY, April 27 /CNW/ - EnCana Corporation's (TSX & NYSE: ECA) firstquarter 2005 total cash flow per share increased 46 percent to US$3.11 pershare diluted, or $1.41 billion, compared to the first quarter of 2004. Cashflow and operating earnings rose due to increased sales, higher natural gasand liquids prices and strong operating performance during the first quarter.Total operating earnings increased 34 percent per share to $1.34 per sharediluted, or $611 million, compared to the first quarter of 2004. First quartersales of natural gas, oil and natural gas liquids (NGLs) from total operationsincreased 8 percent per share from the first quarter of 2004. Sales were4.52 billion cubic feet of gas equivalent (Bcfe) per day. EnCana's firstquarter net earnings were impacted by an unrealized after-tax loss due tomark-to-market accounting of all hedges, which run primarily through 2006.This resulted in a first quarter net loss from total operations of 10 centsper share diluted, or $45 million.

EnCana increases quarterly dividend 50 percent to 15 cents per share

Given EnCana's strong financial and operating performance, the board ofdirectors has increased the quarterly dividend 50 percent from 10 to 15 centsper share, on a pre-split basis, which is payable on June 30, 2005 to commonshareholders of record as of June 15, 2005. "In the past several months, the market has recognized the merits of oursharpened focus on profitable, long life North American resource plays. Ourunconventional strategy is delivering strong shareholder value. Along withdisciplined capital investment in our large portfolio of resource plays, weare returning capital to shareholders through share buybacks and today's 50percent dividend increase as we work to build the net asset value of everyEnCana share," said Gwyn Morgan, EnCana's President & Chief Executive Officer.

IMPORTANT NOTE: EnCana reports in U.S. dollars and follows U.S.protocols, which report sales and reserves on an after-royalties basis. Alldollar figures are U.S. dollars unless otherwise noted. EnCana is treating theU.K. and Ecuador operations as discontinued because the U.K. operations weresold in December 2004 and EnCana plans to sell its Ecuador assets. Totalresults, which include results from Ecuador in 2005 and from the U.K. in priorperiods, are reported in the company's financial statements included in thisnews release and in supplementary documents posted on its Web site -www.encana.com.

EnCana's first quarter 2005 cash flow per share from continuingoperations increased 50 percent to $2.88 per share diluted, or $1.31 billion,compared to the same period in 2004. First quarter cash flow from continuingoperations includes a cash tax provision of $225 million, which is consistentwith the company's 2005 guidance. Operating earnings from continuingoperations per share increased 15 percent to $1.14 per share diluted, or$518 million, compared to the first quarter of 2004. EnCana's first quarternet earnings from continuing operations were reduced by $628 million, after-tax, as a result of the unrealized mark-to-market accounting standardgoverning price risk management activity. About one-third of the mark-to-market loss is attributed to price hedges put in place in the springof 2004, relating to the acquisition of Tom Brown, Inc. The Tom Brown volumeswere hedged through 2006 as a prudent financial measure to help lock in strongreturns on the 2004 acquisition. The balance primarily applies to other oiland gas hedges running through 2006. First quarter net earnings also includean after-tax unrealized loss of $15 million due to translation of U.S. dollardenominated debt issued in Canada. These unrealized hedging and currencylosses resulted in a net loss from continuing operations of 28 cents per sharediluted, or $125 million, compared to net earnings of $326 million in the same2004 period.

Sales from continuing operations up 14 percent per share

First quarter sales of natural gas, oil and NGLs from continuingoperations increased 14 percent per share from the first quarter of 2004.First quarter sales were 4.09 Bcfe per day. "A successful winter of drilling across our Canadian resource plays, thecontinued development of our expanded assets in the U.S. and increasing demandand prices for natural gas and oil have combined to generate strong firstquarter cash flow and operating earnings for EnCana. Despite a number ofweather related setbacks in the quarter, we are on track in 2005 to meet oursales guidance. Natural gas production from EnCana's North American resourceplays is expected to drive a steady climb during the next three quarterstowards achieving 2005 sales of between 3.35 billion and 3.50 billion cubicfeet of natural gas per day," Morgan said. "We continue to focus on efficient execution in the development of ourkey long-life North American resource plays, where daily production hasincreased 23 percent in the past year. By applying rigorous capital disciplineand adding new efficiencies each year, we are achieving strong returns fromthese plays," Morgan said.

Natural gas sales from continuing operations up 20 percent per share in past year

EnCana's first quarter natural gas sales from continuing operationsincreased 20 percent per share to 3.15 billion cubic feet per day comparedwith the first quarter of 2004. Oil and NGLs sales from continuing operationsof 157,000 barrels per day decreased 3 percent per share, due to the sale ofconventional oil properties during 2004. Operating costs from continuingoperations were 64 cents per thousand cubic feet of gas equivalent (Mcfe),which is slightly higher than the company's full year forecast range duemainly to the impact of an appreciating Canadian dollar. EnCana expects fullyear operating costs to be within guidance of 55 to 60 cents per Mcfe. Firstquarter capital investment was $1.5 billion. EnCana drilled 1,352 net wellsduring the first quarter, about one-quarter of its 2005 forecast of between5,000 and 5,500 net wells. At the end of March 2005, the company had about1,500 gas wells awaiting tie-in.

Resource plays typically have huge long term potential beyond currentlyproducing wells. EnCana's Total Resource Portfolio consists of its provedreserves and its Unbooked Resource Potential. Proved reserves are estimated byindependent evaluators in accordance with regulatory standards and industrybest practices. EnCana engineers have recently updated the company's UnbookedResource Potential effective December 31, 2004. In 2004, EnCana's provedreserves from continuing operations grew by 19 percent, before bitumenrevision, to 14.8 trillion cubic feet equivalent. Beyond proved reserves, thecompany has estimated its Unbooked Resource Potential to be the quantities ofhydrocarbons that may be added to proved reserves through the low-riskdevelopment of known resources within existing landholdings, that exceed thecompany's targeted economic thresholds. EnCana estimates that this UnbookedResource Potential could be converted to proved reserves over the next fiveyears should the company choose to exploit its drilling inventory at a ratewhich results in compounded annual production growth exceeding 10 percent.Should EnCana proceed with a lower growth rate strategy, it is expected thatthe Unbooked Resource Potential would be converted to proved reserves over alonger time frame. As of December 31, 2004, EnCana estimates its UnbookedResource Potential is 19 trillion cubic feet of natural gas and 900 millionbarrels of oil and NGLs. The estimate of Unbooked Resource Potential is basedon information currently available to EnCana; actual results may differmaterially from these estimates.

EnCana's resource life exceeds a quarter century

EnCana's Total Resource Portfolio is key to EnCana's predictablelong-term development plans. Based on EnCana's 2004 production, the company'sestimated total natural gas resource life is about 27 years. For oil and NGLs,the company's total oil and NGLs resource life estimate is about 26 years.EnCana's total resource drilling inventory consists of about 36,000 gas wellsand about 1,000 oil wells at year end 2004. "EnCana is extremely well positioned to continue to create shareholdervalue over the long run as it executes on its huge drilling inventory withinour low-risk manufacturing style development program. Largely contained inapproximately 18 million net undeveloped acres of onshore North Americanlands, this total resource life extends for more than a quarter century, basedon 2004 production rates, and we believe has the ability to fuel sustainable,profitable growth for many years," said Randy Eresman, EnCana's ChiefOperating Officer.

EnCana is on track to meet its 2005 full year sales guidance, fromcontinuing operations, of between 4.25 billion and 4.50 billion cubic feet ofgas equivalent per day, comprised of between 3.35 billion and 3.50 billioncubic feet of natural gas per day and between 150,000 and 170,000 barrels ofoil and NGLs per day. The company's sales guidance assumes the divestiture ofapproximately 22,000 BOE per day of conventional Canadian production laterthis year. The liquids guidance does not include production of between 75,000and 85,000 barrels of oil per day from Ecuador, which has been treated asdiscontinued due to the planned divestiture.

North American natural gas prices rise in the first quarter of 2005

EnCana's North American realized field prices, excluding financialhedging, averaged $5.81 per thousand cubic feet, up 10 percent in the firstquarter of 2005 from an average of $5.26 per thousand cubic feet in the same2004 period. Including hedging, EnCana's average first quarter realized gasprice was $5.99 per thousand cubic feet. Natural gas prices are expected tostay strong due to the tight North American supply and demand balance drivenby continued demand growth primarily from the electricity generation industrywhile overall supply has struggled to keep pace. The average first quarterbenchmark NYMEX index gas price was $6.27 per thousand cubic feet, up 10percent from $5.69 per thousand cubic feet in the first quarter of 2004.

World oil prices continued to be strong through the first quarter of 2005due to increasing global demand, primarily in Asia and North America. Duringthe first quarter of 2005, the average benchmark West Texas Intermediate (WTI)crude oil price was $50.03 per barrel, up 42 percent from the first quarter2004 average of $35.25 per barrel. The substantially higher level of WTI,combined with limited worldwide upgrading capacity for heavy crude oils,resulted in a significant widening of light/heavy crude oil pricedifferentials. In the first quarter, the WTI/Bow River differential increased105 percent to $18.51 per barrel compared to the same 2004 period. In thefirst quarter, EnCana's average realized oil and NGLs price, excludinghedging, was $29.77 per barrel, up 17 percent; including hedging it was $24.59per barrel, up 19 percent compared to the same period in 2004.

Risk management strategy

EnCana's market risk mitigation strategy is intended to help delivergreater predictability of cash flow and returns on investment. Detailed riskmanagement positions at March 31, 2005 are presented in Note 12 to theunaudited first quarter consolidated financial statements. In the firstquarter of 2005, EnCana's financial commodity risk management measuresresulted in after-tax cash flow from continuing operations being lower byapproximately $10 million, comprised of a $49 million loss on oil hedges,offset by a $35 million gain on gas hedges and a $4 million gain on otherhedges.

Hedging aimed at providing downside price protection

A review of the company's hedging strategy in 2004 resulted in apreference towards the use of hedging instruments which provide downsideprotection, but do not limit upside in a rising price environment. Currently,about 79 percent of 2005 forecast gas sales is exposed to price upside, whileabout 53 percent has downside price protection. For oil, about 81 percent of2005 forecast oil sales is exposed to price upside, while about 34 percent hasdownside protection. Overall, on a Mcfe basis, about 80 percent of EnCana'sforecast 2005 sales are exposed to market price upside. Beyond 2005, fixedprice hedges are in place for approximately 810 million cubic feet per day of2006 gas production and 31 million cubic feet per day of 2007 gas production.

EnCana financial results in U.S. dollars and operating results according to U.S. protocols

EnCana reports in U.S. dollars and according to U.S. protocols in orderto facilitate a more direct comparison to other North American upstream oiland natural gas exploration and development companies. Reserves and productionare reported on an after-royalty basis.

In North America, development capital continues to be focused on turningEnCana's Unbooked Resource Potential into production and reserves. Firstquarter oil and gas production from key North American resource plays hasincreased more than 23 percent since the first quarter of 2004. This is drivenmainly by increases in gas production in the Piceance basin in Colorado,shallow gas and coalbed methane (CBM) on the company's legacy Suffield andPalliser Blocks, Cutbank Ridge in northeast British Columbia, the acquisitionof East Texas lands and growth from the Fort Worth resource play, plusincreases in oil production at Pelican Lake in northeast Alberta.

At the Annual and Special meeting of EnCana's shareholders later today,EnCana's shareholders are being asked to approve the split of EnCana'soutstanding common shares on a two-for-one basis. In addition to shareholderapproval, the stock split is subject to the receipt of all required regulatoryapprovals. If approved by shareholders, and subject to regulatory approvals, eachshareholder will receive one additional common share for each common shareheld on the record date for the stock split of May 12, 2005. Pursuant to therules of the Toronto Stock Exchange, EnCana's common shares will commencetrading on a subdivided basis at the opening of business on May 10, 2005,which is the second trading day preceding the record date. Also on May 10,2005, EnCana's common shares listed on the New York Stock Exchange (NYSE) willcommence trading with rights entitling holders to an additional common sharefor each common share held upon the commencement of trading of the commonshares on a subdivided basis on the NYSE. The trading of the common shares ona subdivided basis on the NYSE will occur one day after the delivery of sharecertificates to registered holders of EnCana's common shares. It isanticipated that share certificates representing the additional common sharesresulting from the stock split will be mailed to registered commonshareholders on or about May 20, 2005.

Quarterly dividend increased 50 percent to 15 cents per share

EnCana's board of directors has increased the company's quarterlydividend 50 percent to 15 cents per share, on a pre-split basis, which ispayable on June 30, 2005 to common shareholders of record as of June 15, 2005.

Normal Course Issuer Bid purchases

To date in 2005, EnCana has purchased for cancellation approximately 11million of its shares at an average price of $61.65 per share under itscurrent Normal Course Issuer Bid, which allows the company to purchase up to10 percent of the company's public float at the time of the approval of theoriginal bid - October, 2004. The company had 440.8 million shares outstandingat March 31, 2005. EnCana's 2005 capital program is expected to be funded bycash flow, while the company's planned divestitures of conventional assets in2005 are expected to bring in substantial funds which EnCana believes willprovide the opportunity to increase net asset value per share through sharepurchases and debt repayment.

Financial strength ------------------

EnCana maintains a strong balance sheet. At March 31, 2005 the company'snet debt-to-capitalization ratio was 39:61. EnCana's net debt-to-EBITDAmultiple, on a trailing 12-month basis, was 1.8 times. These ratios areexpected to decrease through the year due to cash inflows from operations andasset sales. In the first quarter of 2005, EnCana invested $1,519 million of capitalin continuing operations. Net divestitures were $53 million, resulting in netcapital investment in continuing operations of $1,466 million.

To participate, please dial (913) 312-1295 approximately 10 minutes prior to the conference call. An archived recording of the call will be available from approximately 5 p.m. on April 27, 2005 until midnight May 3, 2005 by dialling (888) 203-1112 or (719) 457-0820 and entering pass code 9649948.

A live audio Web cast of the conference call will also be available via EnCana's Web site, www.encana.com, under Investor Relations. The Web cast will be archived for approximately 90 days. -------------------------------------------------------------------------

EnCana Corporation

With an enterprise value of approximately US$38 billion, EnCana is one ofNorth America's leading natural gas producers, is among the largest holders ofgas and oil resource lands onshore North America and is a technical and costleader in the in-situ recovery of oilsands bitumen. EnCana deliverspredictable, reliable, profitable growth from its portfolio of long-liferesource plays situated in Canada and the United States. Contained inunconventional reservoirs, resource plays are large contiguous accumulationsof hydrocarbons, located in thick or areally extensive deposits, thattypically have low geological and commercial development risk, low averagedecline rates and very long producing lives. The application of technology tounlock the huge resource potential of these plays typically results incontinuous increases in production and reserves and decreases in costs overmultiple decades of resource play life. EnCana common shares trade on theToronto and New York stock exchanges under the symbol ECA.

NOTE 1: Non-GAAP measures

This news release contains references to cash flow, pre-tax cash flow,cash flow from continuing operations, operating earnings from continuingoperations and total operating earnings. Total operating earnings is anon-GAAP measure that shows net earnings excluding non-operating items such asthe after-tax impacts of a gain on the sale of discontinued operations, theafter-tax gain/loss of unrealized mark-to-market accounting for derivativeinstruments, the after-tax gain/loss on translation of U.S. dollar denominateddebt issued in Canada and the effect of the reduction in income tax rates.Management believes these items reduce the comparability of the company'sunderlying financial performance between periods. The majority of theunrealized gains/losses that relate to U.S. dollar debt issued in Canada arefor debt with maturity dates in excess of five years. These measures have beendescribed and presented in this news release in order to provide shareholdersand potential investors with additional information regarding EnCana'sliquidity and its ability to generate funds to finance its operations.

ADVISORY REGARDING RESERVES DATA AND OTHER OIL AND GAS INFORMATION -EnCana's disclosure of reserves data and other oil and gas information is madein reliance on an exemption granted to EnCana by Canadian securitiesregulatory authorities which permits it to provide such disclosure inaccordance with U.S. disclosure requirements. The information provided byEnCana may differ from the corresponding information prepared in accordancewith Canadian disclosure standards under National Instrument 51-101 (NI 51-101). EnCana's reserves quantities represent net proved reservescalculated using the standards contained in Regulation S-X of the U.S.Securities and Exchange Commission. Further information about the differencesbetween the U.S. requirements and the NI 51-101 requirements is set forthunder the heading "Note Regarding Reserves Data and Other Oil and GasInformation" in EnCana's Annual Information Form. In this news release, certain crude oil and NGLs volumes have beenconverted to cubic feet equivalent (cfe) on the basis of one barrel (bbl) tosix thousand cubic feet (Mcf). Also, certain natural gas volumes have beenconverted to barrels of oil equivalent (BOE) on the same basis. BOE and cfemay be misleading, particularly if used in isolation. A conversion ratio ofone bbl to six Mcf is based on an energy equivalency conversion methodprimarily applicable at the burner tip and does not necessarily representvalue equivalency at the well head.

ADVISORY REGARDING FORWARD-LOOKING STATEMENTS - In the interests ofproviding EnCana shareholders and potential investors with informationregarding EnCana, including management's assessment of EnCana's and itssubsidiaries' future plans and operations, certain statements contained inthis news release are forward-looking statements within the meaning of the"safe harbour" provisions of the United States Private Securities LitigationReform Act of 1995. Forward-looking statements in this news release include,but are not limited to: future economic and operating performance (includingper share growth and increase in net asset value); anticipated life of provedreserves; anticipated Unbooked Resource Potential; anticipated conversion ofUnbooked Resource Potential to proved reserves; estimates of the company'sTotal Resource Portfolio; anticipated growth and success of resource plays andthe expected characteristics of resource plays; anticipated total resourcelife, including total natural gas resource life and total oil and NGLsresource life; planned divestitures of conventional Canadian properties, thepotential structure of such transactions and the potential monetization ofsuch assets; planned sale of interests in the Gulf of Mexico and Ecuador andthe timing of such potential transactions; the expected proceeds from planneddivestitures; expected proportion of total production and cash flowscontributed by natural gas; anticipated success of EnCana's market riskmitigation strategy and EnCana's ability to participate in commodity priceupside; the anticipated steps to implement the proposed two-for-one sharesplit and the impact of such a split; anticipated purchases pursuant to theNormal Course Issuer Bid; estimated reserve life indices; potential demand forgas; anticipated production in 2005 and beyond; anticipated drilling;potential capital expenditures and investment; potential oil, natural gas andNGLs sales in 2005 and beyond; anticipated ability to meet production,operating cost and sales guidance targets; anticipated costs; anticipatedprices for natural gas; potential sale of the company's NGLs business and thetiming of such a transaction; potential risks associated with drilling andreferences to potential exploration. Readers are cautioned not to place unduereliance on forward-looking statements, as there can be no assurance that theplans, intentions or expectations upon which they are based will occur. Bytheir nature, forward-looking statements involve numerous assumptions, knownand unknown risks and uncertainties, both general and specific, thatcontribute to the possibility that the predictions, forecasts, projections andother forward-looking statements will not occur, which may cause the company'sactual performance and financial results in future periods to differmaterially from any estimates or projections of future performance or resultsexpressed or implied by such forward-looking statements. These risks anduncertainties include, among other things: volatility of oil and gas prices;fluctuations in currency and interest rates; product supply and demand; marketcompetition; risks inherent in the company's marketing operations, includingcredit risks; imprecision of reserves estimates and estimates of recoverablequantities of oil, natural gas and liquids from resource plays and othersources not currently classified as proved reserves; the company's ability toreplace and expand oil and gas reserves; its ability to generate sufficientcash flow from operations to meet its current and future obligations; itsability to access external sources of debt and equity capital; the timing andthe costs of well and pipeline construction; the company's ability to secureadequate product transportation; changes in environmental and otherregulations or the interpretations of such regulations; political and economicconditions in the countries in which the company operates, including Ecuador;the risk of war, hostilities, civil insurrection and instability affectingcountries in which the company operates and terrorist threats; risksassociated with existing and potential future lawsuits and regulatory actionsmade against the company; and other risks and uncertainties described fromtime to time in the reports and filings made with securities regulatoryauthorities by EnCana. Although EnCana believes that the expectationsrepresented by such forward-looking statements are reasonable, there can be noassurance that such expectations will prove to be correct. Readers arecautioned that the foregoing list of important factors is not exhaustive. Furthermore, the forward-looking statements contained in this newsrelease are made as of the date of this news release, and EnCana does notundertake any obligation to update publicly or to revise any of the includedforward-looking statements, whether as a result of new information, futureevents or otherwise. The forward-looking statements contained in this newsrelease are expressly qualified by this cautionary statement.

Interim Consolidated Financial Statements (unaudited) For the period ended March 31, 2005

The interim Consolidated Financial Statements include the accounts of EnCana Corporation and its subsidiaries ("EnCana" or the "Company"), and are presented in accordance with Canadian generally accepted accounting principles. The Company is in the business of exploration for, and production and marketing of, natural gas, crude oil and natural gas liquids, as well as natural gas storage, natural gas liquids processing and power generation operations.

The interim Consolidated Financial Statements have been prepared following the same accounting policies and methods of computation as the annual audited Consolidated Financial Statements for the year ended December 31, 2004. The disclosures provided below are incremental to those included with the annual audited Consolidated Financial Statements. The interim Consolidated Financial Statements should be read in conjunction with the annual audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2004.

2. SEGMENTED INFORMATION

The Company has defined its continuing operations into the following segments:

- Upstream includes the Company's exploration for, and development and production of, natural gas, crude oil and natural gas liquids and other related activities. The majority of the Company's Upstream operations are located in Canada and the United States. International new venture exploration is mainly focused on opportunities in Africa, South America, the Middle East and Greenland.

- Midstream & Market Optimization is conducted by the Midstream & Marketing division. Midstream includes natural gas storage, natural gas liquids processing and power generation. The Marketing groups' primary responsibility is the sale of the Company's proprietary production. The results are included in the Upstream segment. Correspondingly, the Marketing groups also undertake market optimization activities which comprise third party purchases and sales of product that provide operational flexibility for transportation commitments, product type, delivery points and customer diversification. These activities are reflected in the Midstream & Market Optimization segment.

- Corporate includes unrealized gains or losses recorded on derivative instruments. Once amounts are settled, the realized gains and losses are recorded in the operating segment to which the derivative instrument relates.

Midstream & Market Optimization purchases substantially all of the Company's North American Upstream production. Transactions between business segments are based on market values and eliminated on consolidation. The tables in this note present financial information on an after eliminations basis.

Operations that have been discontinued are disclosed in Note 3.

Results of Continuing Operations (For the three months ended March 31)

In addition to the capital expenditures, during 2005, EnCana divested of mature conventional oil and natural gas assets and other property, plant and equipment for proceeds of $53 million (2004 - $25 million).

Property, Plant and Equipment and Total Assets

Property, Plant and Equipment Total Assets --------------------------------------- As at As at --------------------------------------- March 31, December March 31, December 2005 31, 2004 2005 31, 2004 -------------------------------------------------------------------------

At December 31, 2004, EnCana decided to divest of its Ecuador operations and such operations have been accounted for as discontinued operations. EnCana's Ecuador operations include the 100 percent working interest in the Tarapoa Block, majority operating interest in Blocks 14, 17 and Shiripuno, the non-operated economic interest in Block 15 and the 36.3 percent indirect equity investment in Oleoducto de Crudos Pesados (OCP) Ltd. ("OCP"), which is the owner of a crude oil pipeline in Ecuador that ships crude oil from the producing areas of Ecuador to an export marine terminal. The Company is a shipper on the OCP Pipeline and pays commercial rates for tariffs. The majority of the Company's crude oil produced in Ecuador is sold to a single marketing company. Payments are secured by letters of credit from a major financial institution which has a high quality investment grade credit rating.

On December 1, 2004, the Company completed the sale of its 100 percent interest in EnCana (U.K.) Limited for net cash consideration of approximately $2.1 billion. EnCana's U.K. operations included crude oil and natural gas interests in the U.K. central North Sea including the Buzzard, Scott and Telford oil fields, as well as other satellite discoveries and exploration licenses. A gain on sale of approximately $1.4 billion was recorded. Accordingly, these operations have been accounted for as discontinued operations.

Consolidated Statement of Earnings

The following table presents the effect of the discontinued operations in the Consolidated Statement of Earnings:

For the three months ended March 31 ----------------------------------------------------- Ecuador United Kingdom Total ----------------------------------------------------- 2005 2004 2005 2004 2005 2004 -------------------------------------------------------------------------

In Ecuador, a subsidiary of EnCana has a 40 percent non-operated economic interest in relation to Block 15 pursuant to a contract with a subsidiary of Occidental Petroleum Corporation. In its 2004 filings with Securities regulatory authorities, Occidental Petroleum Corporation indicated that its subsidiary had received formal notification from Petroecuador, the state oil company of Ecuador, initiating proceedings to determine if the subsidiary had violated the Hydrocarbons Law and its Participation Contract for Block 15 with Petroecuador and whether such violations constitute grounds for terminating the Participation Contract.

In its filings, Occidental Petroleum Corporation indicated that it believes it has complied with all material obligations under the Participation Contract and that any termination of the Participation Contract by Ecuador based upon these stated allegations would be unfounded and would constitute an unlawful expropriation under international treaties.

In addition to the above, the Company is proceeding with its arbitration related to value-added tax ("VAT") owed to the Company and is in discussions related to certain income tax matters related to interest deductibility in Ecuador.

4. DISPOSITIONS

In March 2004, the Company sold its equity investment in a well servicing company for approximately $44 million, recording a pre-tax gain on sale of $34 million.

On February 18, 2004, the Company sold its 53.3 percent interest in Petrovera Resources ("Petrovera") for approximately $288 million, including working capital adjustments. In order to facilitate the transaction, the Company purchased the 46.7 percent interest of its partner for approximately $253 million, including working capital adjustments, and then sold the 100 percent interest in Petrovera for a total of approximately $541 million, including working capital adjustments. In accordance with full cost accounting for oil and gas activities, proceeds were credited to property, plant and equipment.

(*) Certain of the notes and debentures of EnCana were acquired in business combinations and were accounted for at their fair value at the dates of acquisition. The difference between the fair value and the principal amount of the debt is being amortized over the remaining life of the outstanding debt acquired, approximately 22 years.

8. ASSET RETIREMENT OBLIGATION

The following table presents the reconciliation of the beginning and ending aggregate carrying amount of the obligation associated with the retirement of oil and gas properties:

As at As at March 31, December 31, 2005 2004 -------------------------------------------------------------------------

During the quarter, the Company purchased 12,255,029 Common Shares for total consideration of approximately $760 million. Of the amount paid, $190 million was charged to Share capital, $10 million was charged to Paid in surplus and $560 million was charged to Retained earnings. Included in the above are 1.3 million Common Shares which have been repurchased by a wholly owned Trust and are held for issuance upon vesting of units under EnCana's Performance Share Unit plan (see Note 10).

On October 26, 2004, the Company received regulatory approval for a new Normal Course Issuer Bid commencing October 29, 2004. Under this bid, the Company may purchase for cancellation up to 23,114,500 of its Common Shares, representing five percent of the approximately 462.29 million Common Shares outstanding as of the filing of the bid on October 22, 2004. On February 4, 2005, the Company received regulatory approval for an amendment to the Normal Course Issuer Bid which increases the number of shares available for purchase from five percent of the issued and outstanding Common Shares to ten percent of the public float of Common Shares (a total of approximately 46.1 million Common Shares). The current Normal Course Issuer Bid expires on October 28, 2005.

The Company has stock-based compensation plans that allow employees and directors to purchase Common Shares of the Company. Option exercise prices approximate the market price for the Common Shares on the date the options were issued. Options granted under the plans are generally fully exercisable after three years and expire five years after the grant date. Options granted under predecessor and/or related company replacement plans expire up to ten years from the date the options were granted.

The following tables summarize the information about options to purchase Common Shares that do not have Tandem Share Appreciation Rights ("TSAR's") attached to them at March 31, 2005. Information related to TSAR's is included in Note 10. Weighted Stock Average Options Exercise (millions) Price (C$) -------------------------------------------------------------------------

EnCana has recorded stock-based compensation expense in the Consolidated Statement of Earnings for stock options granted to employees and directors in 2003 using the fair-value method. Stock options granted in 2004 and 2005 have an associated Tandem Share Appreciation Right attached. Compensation expense has not been recorded in the Consolidated Statement of Earnings related to stock options granted prior to 2003. If the Company had applied the fair-value method to options granted prior to 2003, pro forma Net Earnings and Net Earnings per Common Share for the three months ended March 31, 2005 would be unchanged (2004 - $281 million; $0.61 per common share - basic; $0.60 per common share - diluted).

10. COMPENSATION PLANS

The tables below outline certain information related to EnCana's compensation plans at March 31, 2005. Additional information is contained in Note 16 of the Company's annual audited Consolidated Financial Statements for the year ended December 31, 2004.

The Company previously disclosed in its annual audited Consolidated Financial Statements for the year ended December 31, 2004 that it expected to contribute $6 million to its defined benefit pension plans in 2005. At March 31, 2005, no contributions have been made.

B) Share Appreciation Rights ("SAR's")

The following table summarizes the information about SAR's at March 31, 2005: Weighted Average Outstanding Exercise SAR's Price -------------------------------------------------------------------------

Canadian Dollar Denominated (C$) Outstanding, Beginning of Year 465,255 36.61 Exercised (268,558) 29.81 ------------------------------------------------------------------------- Outstanding, End of Period 196,697 45.89 ------------------------------------------------------------------------- Exercisable, End of Period 196,697 45.89 ------------------------------------------------------------------------- -------------------------------------------------------------------------

U.S. Dollar Denominated (US$) Outstanding, Beginning of Year 385,930 28.80 Exercised (73,760) 28.99 ------------------------------------------------------------------------- Outstanding, End of Period 312,170 28.75 ------------------------------------------------------------------------- Exercisable, End of Period 312,170 28.75 ------------------------------------------------------------------------- -------------------------------------------------------------------------

During the quarter, EnCana recorded compensation costs of $9 million related to the outstanding SAR's (2004 - $2 million).

C) Tandem Share Appreciation Rights ("TSAR's")

The following table summarizes the information about Tandem SAR's at March 31, 2005: Weighted Average Outstanding Exercise TSAR's Price -------------------------------------------------------------------------

During the quarter, EnCana recorded compensation costs of $5 million related to the outstanding TSAR's (2004 - nil).

D) Deferred Share Units ("DSU's")

The following table summarizes the information about DSU's at March 31, 2005: Weighted Average Outstanding Exercise DSU's Price -------------------------------------------------------------------------

During the quarter, EnCana recorded compensation costs of $5 million related to the outstanding DSU's (2004 - $3 million).

E) Performance Share Units ("PSU's")

The following table summarizes the information about PSU's at March 31, 2005: Weighted Average Outstanding Exercise PSU's Price -------------------------------------------------------------------------

As discussed in Note 2 to the annual audited Consolidated Financial Statements for the year ended December 31, 2004, on January 1, 2004, the fair value of all outstanding financial instruments that were not considered accounting hedges was recorded in the Consolidated Balance Sheet with an offsetting net deferred loss amount (the "transition amount"). The transition amount is recognized into net earnings over the life of the related contracts. Changes in fair value after that time are recorded in the Consolidated Balance Sheet with an associated unrealized gain or loss recorded in net earnings. The estimated fair value of all derivative instruments is based on quoted market prices or, in their absence, third party market indications and forecasts.

At March 31, 2005, a net unrealized gain remains to be recognized over the next four years as follows:

2006 $ 24 2007 15 2008 1 ------------------------------------------------------------------------- Total to be recognized in 2006 through to 2008 $ 40 -------------------------------------------------------------------------

------------------------------------------------------------------------- Total to be recognized $ 72 ------------------------------------------------------------------------- -------------------------------------------------------------------------

Information with respect to power and interest rate risk contracts in place at December 31, 2004 is disclosed in Note 17 to the Company's annual audited Consolidated Financial Statements. No significant new contracts have been entered into as at March 31, 2005.

Natural Gas

At March 31, 2005, the Company's gas risk management activities from financial contracts had an unrealized loss of $798 million and a fair market value position of $(739) million. The contracts were as follows:

At March 31, 2005, the Company's oil risk management activities from financial contracts had an unrealized loss of $408 million and a fair market value position of $(377) million. The contracts were as follows: